Obama pressures China over imbalances

Obama said all G-20 members must work together to create a
sustainable global economy. While he said the U.S. must also make changes, his
words made it clear that he wanted exporters and surplus nations such as China
to take a greater role.

The president conceded that the recovery will not be
sustained if “American households stop saving and go back to spending based on
borrowing.”

“Yet no one country can achieve our joint objective of a
strong, sustainable and balanced recovery on its own,” Obama wrote in a letter
to G-20 leaders, dated Tuesday but released on Wednesday.

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“Just as the United States must change, so to must those
economies that have previously relied on exports to offset weaknesses in their
own demand."

While the president did not single out China in a letter to
other G-20 members, observers have for weeks anticipated an economic showdown
when Obama meets with Chinese President Hu Jintao. The two are to meet Thursday
in Seoul.

The G-20 is expected to be dominated by concerns over trade
and budgetary imbalances between countries like the U.S. that have huge trade
and budget deficits, and surplus countries such as China.

The U.S. has long criticized China for keeping the value of
its currency pegged to the dollar, which boosts its exports. But the U.S. is
now coming under intense criticism for the Federal Reserve’s decision to pump
more dollars into the U.S. economy, which might lower the value of the dollar.

Both actions have increased worries of a global currency war
that could hamper the world economy.

At the top of the president's list of objectives in dealing
with China is urging Hu to let the yuan rise and fall with the rest of the
world's currencies, and rebalancing China's surpluses with the U.S.'s trade
deficits.

“A rebalancing of the sources of global demand, along with
market determination of exchange rates that reverses significant undervaluation,
are the best base for the shifts needed to bring about the vigorous and
well-balanced recovery that we all want,” Obama wrote.

The president this week defended the Fed’s decision to print
more money.